039: Automatic Portfolio Rebalancing | Passiv

Money Mechanic
Hello, listeners. Welcome to Explore FI Canada, where we sit at the roundtable with Canadians, and share their thoughts, ideas and personal journeys to financial independence.

Chrissy
Thanks to Matt McKeever for sponsoring Explore FI Canada. Matt is a Canadian investor, CPA, entrepreneur, and real estate expert who achieved FIRE at age 31. Do us a favour and check out his YouTube channel by searching Matt McKeever or using the link in our show notes.

Money Mechanic
Before we start the show today, just a quick apology to Brendan Lee and to you, the listeners because we had some audio issues with this recording, and had to chop out a little bit of his discussion towards the end of the episode. If you miss anything, or you can’t hear it, please leave us a comment in the show notes and we will answer your questions. Enjoy the episode.

Welcome again to the show, listeners. Explore FI Canada, Money Mechanic with you and Chrissy as usual. Good morning, Chrissy.

Chrissy
Good morning. How are you doing?

Money Mechanic
Fantastic. Another exciting show today. And we’re gonna bring on some guests, two guests. We don’t usually do two guests. But we have two today. And they are the founders and creators of Passiv. Chrissy, have you heard of Passiv?

Chrissy
I have and I love the service. I don’t use it myself, because I don’t have much at Questrade. But I I’ve heard about it from the beginning. And I think it’s a perfect service for those who do DIY investing.

Money Mechanic
Yeah, well, that’s one of the things that attracted me to it, because I am a Questrade. user. And I’m also a terrible spreadsheeter. I am a self-admitted terrible spreadsheeter, and I know lots of people in the FI community love their spreadsheets. But I you know, I try I start them, I build them. They work for a couple weeks. And then I kind of get I get a little lazy with it. Plus, I get way too complicated with my ETFs. So Passiv is a service that ties in with Questrade really nicely. And we have the two gentlemen the two Brendans Welcome to the show, guys.

Brendan Lee Young (Bly)
Thanks for having us, Mechanic. Really appreciate it. There are actually three of us so I’d be hard pressed if I didn’t say we had their page. Our Slack channels is a mess. But yeah. Thanks.

Brendan Wood
Yeah. Hi. Thanks for having us.

Money Mechanic
Yeah, you bet. We checked with you just a little bit before we got recording so we knew how to. you know if we said, well, Brendan, what do you think of that? We know who is going to reply. So for the listeners, we’re calling one of you Bly, and one of you Wood.

Brendan Wood
That works perfectly. That’s how we do it in the office.

Money Mechanic
That’s how they do it. So we figured there’d be some confusion. But anyway, go ahead, Bly, and just sort of give us a brief introduction of what Passiv is, or maybe you can hand off who, who’s better at what side of it. I’m not sure how it all relates there. But go ahead and introduce the product to the listeners.

Brendan Lee Young (Bly)
Yeah, sure. So basically, we created Passiv because we were following a Couch Potato model, ETF portfolio, and just like you, Mechanic, we were using spreadsheets, and it sucked man, like I like I hated spending my Friday afternoons hiding from my boss, trying to place trades on my Questrade account. Like, I almost got fired one point. No, I’m just kidding. I didn’t get fired. But like she did, she did ask me like, what are you doing Brendan? And anyway, so like, I really just hated using spreadsheets. And basically, we that’s sort of why we created Passiv really to help do it yourself investors following model portfolios, to automate and manage investments for themselves without having to use a spreadsheet. So that’s the why behind Passiv and Brendan has a bit more of a complicated situation. And so maybe what you can like, explain why you did it, because you actually did create a pass, right?

Brendan Wood
Right. So Passiv started as a like, 50-line Python script that I wrote for myself on a weekend. And it was sort of like a similar situation where I was managing accounts at Questrade. And as my family grew, the number of accounts grew. And it just kind of got painful to manage them all together. So I had six accounts at that time, and it was just taking me like, just more time that I wanted to put into it to manage it.

Chrissy
Yeah, I totally get that. I only have my husband and I well, of course, my kids each had their own account and RESP. So it’s very, it very quickly balloons into something that’s very unwieldy when you have four people to manage accounts for I think we had at our max maybe eight or nine accounts between the four of us. So I understand the pain of that. So because I DIY invested for quite a few years, and it’s tough to manage and try to oversee the entire portfolio as one it’s very difficult, unless you’re really good at spreadsheets.

Brendan Wood
Yep, because it’s like not super hard to do, but it’s just really tedious. It’s one of these things that’s like a really good candidate for automating or replacing with an app.

Chrissy
So can you tell us more about what Passiv does for anyone who’s hasn’t heard of it and isn’t familiar?

Brendan Lee Young (Bly)
So basically, the premise behind Passiv is to help you allocate your money. And so every month, you’ve got, let’s say, 500 bucks coming into your account. And if you didn’t have Passiv, you’d have to use a spreadsheet to help you figure out the underweight assets in your target portfolio, and then subsequently go on to place those trades, in your Questrade accounts. And so what Passiv does is it helps you keep your ETF portfolio balanced by automatically doing the calculations and displaying the trades that you need to place a trade, then, you know, after launching Passiv, we heard a lot of users saying it would be great if you could actually place those trades for me. And so we we listen a lot to our users and we take feedback very seriously. And so now Passiv, not only you showed me what calculated trades needs to be placed, we actually go place those trades in your Questrade. And so all you got to do is click a button. And that’s it, you’re done. So really, you’re able to keep your portfolio balanced. Finally, on the way to assets, click a button, have those trades placed, go on about your day, watch Netflix, spend time with your family, do whatever you want to do.

Money Mechanic
Yeah, I think that’s a really powerful upgrade that you included in there. When I checked out the platform. I said this, when did you come up with about two years ago?

Brendan Wood
Ah, it’s three years ago.

Money Mechanic
Three years ago? I remember checking out near the beginning. And it had, it had all the rebalancing options in there. But recently, looking through what you’ve upgraded to that that one click Buy option is definitely powerful for a lot of people. And you’ve also included a lot of other good features that we’ll get into here, as we go along in the show here. Now, just in case our listeners aren’t that familiar with sort of the rebalancing aspect of it, just a broad overview is you know, the Couch Potato type portfolio is going to say that you have a Canadian ETF, a US ETF and international and perhaps an emerging, let’s just keep it simple with those four. And what I noticed in Passiv is you import that. And then you have you can have a look at your just call it your four ETF portfolio, and then you can set your allocations for each one. I think this is important for the listeners to understand is that Passiv isn’t suggesting what they should be, you’re totally in control of what you want them to be. And you have what you call your drift. So if your portfolio’s moving out of alignment with those, it gives suggestions. And one thing I noticed you put in now is that you have a sell suggestion, which you didn’t have before, because I imported mine. And I started playing around with some of it and I turned on the sell setting. So just tell us a little bit about why you included some of the little bit more complexity into that rebalancing, because before it was all sort of by rebalancing.

Brendan Wood
Yeah, so we do buy rebalancing by default. And we’ve always done it by default, just because that’s the most common operation that people want to do there. If you’re contributing on a monthly basis, you generally don’t want to be selling. Just buy the underweight, right. So that works for probably 95% of the things you might want to do on Passiv but very occasionally, you might decide that you want to change your portfolio entirely. Or maybe the markets have shifted like they did with the COVID situation. And it might be time to rebalance. So when we pretty early on Passiv, we added the option to turn on selling because that’s kind of an important thing you need to do. But it is sort of buried in the options. It’s it’s meant to be something that you don’t turn on and leave on.

Money Mechanic
Yeah. And I thought that was actually really well done, because I saw it in there, it said learn more. I was like, Oh, that’s interesting. I like the way you’ve created that user interface where it’s, it’s pretty straightforward. Two clicks, you can click a little button that drops down since if you want to do this go to the group settings. And I think it’s laid out very well, I didn’t have any problem with your user interface, it was very easy to use. So I think you did a good job on that.

Brendan Wood
Thank you. I’m really glad to hear that.

Chrissy
Yeah. And I think it’s nice that the sell option is not automatic, because a lot of times that’s where you’re charged, right? Most often in Questrade, you’re not charged when you buy but when you sell you are. So it’s nice that you have that little stop gap that people have to really think about and confirm that they want to do that.

Brendan Lee Young (Bly)
And user feedbacks been, you know, really helpful to us. And so basically, all of the features that you see in Passiv today be it the enabling sells to purchase our cash management feature or reporting feature, and the ability to consolidate all of your accounts into one sort of Passiv account and manage and all this has been really released based on feedback from users. And so what we well what I think is really cool is that since we started Passiv, we’ve gotten like so much feedback. And I think it’s been cool to see the adoption of the features that we build for users. And so like I kind of see Passiv as this, like this group of DIY investors building software for other DIY investors. And so I think that’s really powerful because, you know, when you build something and you put a lot of TLC, and if you want to make sure that the people actually who are requesting these features use it. And so what I like to communicate really is that in as we get more users, we try to stay true to that sort of guiding philosophy of building things that people actually want. And so some of the features that you see there, people have been like asking us for those features for like over a year, and we purposely did not build it, because we want to be sure that when we spend the time and effort to build it, it’s used. And so all this to say, we wouldn’t be as I’d say, like successful or well built as a platform without the support of the users that contribute with feedback. And so I think that’s really important to point out

Money Mechanic
One of the features that I’ve noticed in the new one, here is your reporting. It’s in the beta stage here and reporting. Tell us a little bit about what you have available now for users in the reporting section.

Brendan Wood
Sure. So reporting is you nailed, it’s our newest feature. And it’s something that people have been asking for us for a long time. And we were really hesitant to build it for years. And the reason is that when you think about the philosophy of passive investing, it’s like you shouldn’t really be paying that much attention to how it’s going, right? Like, as long as you’re contributing and contributing to it and like, allocating it appropriately, and not making lots of changes, you should be fine in the long run. So why do we need reporting? But it turns out that there’s more to it than just your portfolio. So the behavior like your own personal behavior, and your psychology, because investing is probably the most important thing that you want to manage when you’re trying to do this on your own. And so we designed the reporting feature around that primarily. So rather than showing you straight up, here’s just a graph of how much money you have. The first graph we show you is here’s how much money you’ve contributed every month over the last so many months in reporting period. And we have a metric that tells you what your streak is, how many months have you gone in sequence without missing a contribution. So what we’re trying to do with our reporting feature is like, separate the things you can control from the things you can’t control, you can’t really control how the market performs. But you can control how you’re contributing and how you’re staying on target, and so on.

Chrissy
I love that. I think your goals are aligned very much with the goals of the users, which is to really do the right thing with investing, right? Try to be hands off, try to be passive. So I think that ties right into your software and how it works. And I love that you’ve built that all in and rolled it in together.

Money Mechanic
Yeah, I really liked these reporting functions at once I got in there and started having a look at it, you know, investment growth on, I’m a bit of a dividend guy on the other side, too. So I’d love seeing how you broke out each of my ETFs and how the dividend history was and things like that. And I mean, that plays into a little bit of psychology to it, seeing all of that. And I think it’s nicely done. It’s it’s not too complicated. I go through some of the other, I have another brokerage and go through some of their metrics, and it gets a little into the weeds. So yeah, I think this is nice and simple. And I was super excited when I saw that 29-month contribution streak. So that made me really happy.

Brendan Lee Young (Bly)
I should also point out that like, do you want to tell them the story about how we built the asset exclusion feature? ‘Cuz I think that’s…

Brendan Wood
Oh, yeah, totally.

Money Mechanic
Oh, which one’s that?

Brendan Wood
That’s the ability to exclude stock picks from your portfolio.

Money Mechanic
Oh, okay. I’ve got one that they didn’t pick up because it’s a private bond, or it picks it up, but it excludes it. So yeah. Okay, go ahead. Tell us about that.

Brendan Wood
Yeah, so yeah, some some assets are unsupported. If it’s not like a tradable security, then it’s something that we can’t directly support. And we just kind of remove it from the portfolio, because it’s the easiest way for us to handle it. But in terms of in terms of the asset exclusion, so like our vision, day one was like this is a tool for people to implement a model portfolio and just follow that model portfolio do nothing else, right? It’s irresponsible, to bought pick stock. That was the philosophy from day one.

Money Mechanic
We got one guy shaking his head and the other guy’s nodding his head.

Brendan Wood
So we’re probably about six months into after starting Passiv and launching it publicly. And Bly says me one day, he’s like, I got some, I want to buy Disney. Like, what is wrong with you? What do you want to buy Disney just by the index, man. And he’s like, Yeah, but I really want to do it. And there’s a few other stocks that I want to get as well, but I don’t really want to like balance them in my portfolio. And because I want to do this Passiv just doesn’t work for me period. Right. It’s like, as soon as as soon as you have a Disney stock in there, and you’ve got your portfolio over here, Passiv is going to tell you your accuracy is too low, because you’re not on target. Or if you have sales turned on, we’re going to tell you to sell all your Disney right. So it just doesn’t work for anybody who would like pick one stock, or a few stocks on the side. And so that’s when we realized, well, that’s not really the point of the application, but we shouldn’t prevent you from doing that in your account if that’s what you want to do. So, we listened I listened to a bought vice and we Kind of hunkered down and figured out a way to remove the like, the things that people don’t want to be used as part of their, their direct target or their model portfolio.

Brendan Lee Young (Bly)
I just want to add that it didn’t take me alone to convince him, right? Because like, I said it, it’s like, no, this goes against all philosophy, blah, blah, blah. And then we get a ton of emails from users saying, I really like it, but I need to exclude some stock picks, like, okay, now you’re gonna listen to me, you’re validating that, like, even among founders, you have this vision, and you’re gonna always listen to users and, and be flexible to change the roadmap and really listen to what people want. And so, again, that’s been like, our core guiding philosophy. Since then, it’s like, before we build something let’s just make sure people want it.

Money Mechanic
So now that I’ve got you both captive here, as an audience, I can give you my feedback.

Brendan Wood
Absolutely, I’d love to hear it.

Money Mechanic
No, actually, it’s just a question because I noticed on there, you support Questrade, which is fantastic. The majority of you know, people interested in FIRE and at FIRE probably using that for the free ETF buys, as we mentioned, you’ve also got Interactive Brokers on there, which is another Canadian brokerage. You’ve got TD Ameritrade. But what about some of the Canadian bank brokerages, I use TD for some other trading. And I know that I can use an API to get into there. And we do want to talk a little bit about security here in a second. But just a question about expanding out to some other brokerages in Canada that’s in the plans, can you drop any sort of clues as to how that’s gonna look going forward?

Brendan Wood
Yeah, so at least at the moment, we have no plans to work with other Canadian brokers. And there’s a couple reasons for that. The first, and probably most important reason is that we actually have an exclusive partnership with Questrade in Canada. So we’re only going to offer in Canada. And that might not be great for people who aren’t with Questrade. But on the other hand, Questrade has been an excellent partner for us. And they’re actually providing Passiv as a free tool to their customers, rather than us having to bill people $100 a year for it. So it’s sort of like a win win for us and our customers and Questrade as well. We do support Interactive Brokers, but not in Canada.

Money Mechanic
Ah, okay, I wondered about that.

Brendan Wood
Yeah. So it’s only international accounts with them. Honestly, I think it would be cool to support other brokers. But even beyond the exclusivity agreement we have with Questrade. There’s no other brokers in Canada that have a proper API for us to work with.

Money Mechanic
Oh, that’s interesting, because I use I’ve been using Wealthica for net worth tracking for a while and I use the, they API me into my Questrade and my TD brokerage. But anyway, let’s talk a little bit about the API side of it, because a lot of people are hesitant to give or to feel like they’re giving any kind of financial information online. So just Yeah, go ahead, Chrissy.

Chrissy
Well, I was just gonna say, let’s, let’s explain what API is in the first place. ‘Cuz I hear that being thrown around a lot these days because there are so many FinTech apps now. So can one of you just explain what API stands for and what it means?

Brendan Wood
Yeah, absolutely. So an API is an application programming interface. And it’s sort of like a generic word that’s used across the programming space for any sort of way of making one piece of software talk to another. So in the context that you hear about in FinTech, it usually has to do with a financial institution that’s making your data available to some third party tool to integrate. And so that generally relies on the institution, what’s holding your money to create this. And when they create it, you’re hopefully it’s done in a way where it’s secure. It’s done in a way where it’s easy for developers to integrate with, and so on. At least in Canada, the vast majority of financial institutions don’t have APIs, or at least publicly facing APIs. They have them internally, they have them for their their own vendors, and so on. But they don’t have an open API that any developer can just go and create an integration with. So to contrast this with something like Questrade. Questrade has an open API. And that means that if you have a Questrade account, you can just go into the developer dashboard and start writing an app. There’s like there’s no overhead associated with it other than just, you know, kind of agreeing to a few basic usability terms. And that’s amazing, then that Passiv wouldn’t exist if we didn’t have easy access to an open brokerage. Because like I said, it started as a 50-line Python script that I built for myself in a weekend. And if there was more of a barrier to entry than that, it just wouldn’t have happened. So to contrast with other institutions, like you mentioned that TD, TD Direct Investing, is that what you were saying has has an integration with Wealthica?

Money Mechanic
Yes.

Brendan Wood
Yeah, so they do, but it’s not a proper API integration from what I understand. So Wealthica uses screen scraping tools, so we know how to integrate with one of these institutions that just doesn’t have a proper API. Then essentially what you do is you have to give your username and password to the service like Wealthica, and then Wealthica will log into your account for you. As far as the bank is concerned, they are you. So you’re kind of given away the keys to your account. And then they scrape all of your information from it. And it’s sounds a bit scary.

Money Mechanic
I’m a little scared now!

Brendan Wood
It is a little bit scary. But it’s also happening everywhere, like you look at Plaid is a great example of another company doing that on like the international scale. So it can be done legit, and it can be done safely. But it’s a little bit different than how most APIs work. In the context of Questrade, we don’t ever have access to a username or a password for customers. The way it works is when you want to connect Passiv to your Questrade account, you click a button and we forward you over to Questrade along with the request that says, hey, we’re requesting access to these particular parts of your account, do you want to grant this, and so you would log into your Questrade account, you’re presented with the request, you can allow it or deny it. And if you allow it, we get back a token that gives us very restricted access to your account.

Chrissy
Now is that each time that you sign into Passiv that it happens? Or is it a one-time thing?

Brendan Wood
it’s theoretically a one-time thing. In practice, occasionally things break, and you got to go re-auth. But that happens rarely, ideally.

Money Mechanic
So I think the bottom line here is that if you set up Passiv to be sort of read-only to so you can manage on rebalancing, it’s completely safe and secure. As far as that connection is concerned.

Brendan Wood
Yes, it’s far more secure than any sort of screen scraping app.

Brendan Lee Young (Bly)
So I just want to point out that even with giving Passiv trading access, we don’t like automatically do the trade to not use a signing-off. So we saw like this sort of misconception that oh, I don’t want someone just like trading on my behalf. And like, well, no as the user, you have full control, which if you just allow this extra permission for that you can place the trades. Now through Passiv, you have to log into Questrade and places it. And so I just want to clarify that there’s no like automatic trading without the user signing off one the trade. So therefore, there’s no instances where people automatically trading without my consent.

Brendan Wood
Users can even restrict the permissions. Like so, by default, when you connect your Questrade account, it’s a read-only permission. So there’s no ability to place trades. And if you do want to place trades, then it’s like a separate thing that you go and authorize later on in the process.

Brendan Lee Young (Bly)
Yeah, we have some users they log in, they grant us the trading access, and then they go revoke it activated me. I find it really, you can totally do it. If you’re just like, ultra concerned about security and safety. You could always toggle it between and maybe we should make that a bit easierif it was used first. Yeah, it’s something thta we see, for sure.

Chrissy
Yeah, I want to talk a little bit more about the security because, as you mentioned, the way that Wealthica grabs information is by logging in as you and I’ve read that I think it’s CDIC that won’t insure you if you are possibly using these kind of aggregators. Like that is one reason why I stopped using Mint. Because, yes, they protect you for fraud. Sometimes your bank will often offer that kind of protection, but they say if you’re authorizing someone else to log in as you it may nullify those coverages. So how does Passiv I don’t know if you can guarantee it. But how do you ensure that users are safe and secure when they use your service?

Brendan Lee Young (Bly)
And that’s why we partner with Questrade. Because they, basically, those same terms and conditions that sort of applies to Passiv users can use it safely and still be covered under their brokers…

Brendan Wood
From a security standpoint, like on our side of things, we take it super seriously. So like we follow up on all the standard industry standard security practices, like encrypting our database, we only use encrypted connections on our like internal network. As far as like users going everything’s secured with HTTPS. We have two-factor authentication for people who want to take that extra level of security on their account. It’s all very, very important to us. If you can imagine what would happen to our business, if there were any sort of leak it like it’s, it would be very damaging. So we it’s like the number one priority for everything we do.

Chrissy
So as someone who’s quite not not very savvy about APIs, can you again, just reiterate. So my understanding is you’re saying that someone logs in on there and but Passiv doesn’t actually see the login info. And then it sends this token you say to Questrade, and then that’s what allows access? Is that correct?

Brendan Wood
Yeah, that’s right. So users never enter their brokerage credentials on Passiv. We always direct you to your brokerage, you log in there. And then the broker says Passiv is requesting access. Do you want to give it to them or no? And If yes, then yeah, it would be a token, which is essentially like a very long randomized string. And it’s kind of like a password, I guess, but it’s very limited permissions and it only allows us access your account through the API according to the permissions that you granted.

Chrissy
Great.

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Money Mechanic
So you’ve got two account structures, the Community and the Elite. And as a Questrade member, I was automatically signed up for the Elite. Can you just explain what the differences are between the two and the advantages?

Brendan Lee Young (Bly)
Well, yeah, sure. So the the Community basically just gives you the free trades. Sorry, the calculated trades. So you can see what trades needs to be placed at Questrade or any broker, you can put your own balance. And that’s pretty pretty much it. In terms of the Elite, you can use on- click trades, multiple brokerage accounts, basically, use multi-account portfolio. So that feature allows you to take all of your accounts and group them into one holistic portfolio and manage it as one. And so like, what we tried to, like, replace that without letting someone have to pay a fee. But if you need some of these more heavy features, then you can use Elite. That supports us and allows us to continue building more features. And, yeah, it gives you what you need if you’ve got a very complicated case.

Money Mechanic
And that, that bonus that comes with the Questrade. Is that a one year offer? Or is that to be determined as moving forward? Or because it was $99? If before I believe it was the pricing right for the Elite?

Brendan Wood
That’s right.

Brendan Lee Young (Bly)
So it’s a it’s an introductory program and we’re hoping that they make it an ongoing basis. And that’s something we’ll be talking to Questrade about. So that’s why I’m very hesitant to say right now. Because I don’t want to set the expectation that we have to continue to make it available, but that’s sort of what I’d like.

Money Mechanic
Yeah, fair enough. I was just in reference to see I saw some comments online about it being was only for one year, this and that. And just to clarify for listeners that it is an introductory offer, and then we’ll see going forward. So I’ve been you know, I think one of the things that all of us in the FI community are really, we push back against anything that’s going to cost us money. But when you understand the value of it and the time savings, maybe it makes sense. And having used Passiv here with the Elite functions. And as I said before, I’m not great at tracking my Questrade ETFs. So I can definitely see some time value in it.

Brendan Lee Young (Bly)
Yeah, it’s really interesting because we’re hearing people are using Passiv with the one-fund ETF. And it’s like, why would you use Passiv if it’s just for the one-fund ETF? And it’s like, well, these users have multiple accounts that they will do one-fund ETF in, they’ve got cash coming in all the time. So it’s like even just holding the one-fund ETF, you still have to log in and check out and place a trade. And yeah, it’s not it’s something you know, once you get beyond a certain threshold, but for me, I say it’s like 50K, some people say hundred thousand in the sense of like (indiscernable). But yeah, I think even for one-fund ETF holders (indiscernable) users at some point, they’re going to be like, Well, why don’t I just hold these ETFs the underlying ETFs into one fund myself and save on the spread for that? Those basis points just for rebalancing like I kind of find is where someone be charged like a scaling for rebalancing for the rest of the year when it’s like (indiscernable) that anymore. How much value are you adding to a client by just charging them up, scaling (indiscernable) rebalance? So like (indiscernable) yeah, all-in-one-fund, people (indiscernable). It’s just really wild!

Chrissy
I just want to clarify then, essentially, anyone in Canada will get Passiv for free right now because the only the way you can access it is through Questrade. And Questrade offers it for free. So it’s free to anyone who’s in Canada.

Money Mechanic
It’s a win. Yeah.

Chrissy
Yeah. Great. So my question is about the rebalancing, because there are different philosophies when it comes to rebalancing. I think Larry Swed, Swedroe is famous for promoting one type of rebalancing. Like there’s certain thresholds that he recommends. And I think Canadian Couch Potato also has slightly different ones. And they also recommend Larry Swedroe. So how do you integrate that in, and can users set the amounts that they want to rebalance by? How does that work?

Brendan Wood
The default way that Passiv works, like we were saying earlier, is like by only and sort of like designed around the expectation that you’re going to be contributing on a monthly basis or whatever. So the default way that you rebalance, the Passiv is continuously for the first three years that I was using Passiv as a personal tool. And as like a proper tool, I never had to do a full rebalance that involved selling because I was contributing enough that any ebbs and flows, the market would just balance out, you know, from the contributions. So it was really only with the market crash a few months ago that like shifted everything enough that I was like, Okay, I’m out of balance by like, 7% here, maybe I should rebalance. And the thing that triggered me to rebalance was this, this feature we have called Drift Notification. So it’s something that you can configure for your own account by default set to 95%. And in terms of like your portfolio accuracy, where zero percent means you’re like not holding anything, you said, you want to hold on your target, and 100% means you’re perfectly on target. So if you’re dropped to 95%, you’re down, you’re off by 5%. And that’s the default threshold. So that that email triggered back when the market was shifting a few months ago, and it sent me a message saying, Hey, your accuracy is below the threshold. Why don’t you log in and decide if you want to rebalance?

Chrissy
I love that, that makes it so easy, because when I used to do it, I had a spreadsheet and I had to just gauge for myself and it was a hit headache really, because I’d have to look at each asset class and decide, okay, how far off am I and it was a nightmare. When I decided to just change up my asset allocation, I wanted to add small cap value. And that was just sent me into a tailspin because it changed the percentages of everything. And it took a lot of work to figure out how much I needed to sell how much to buy. And because they were also spread amongst so many accounts, I couldn’t figure out a better way to do other than just tediously manually going through each account. So I wish Passiv was there for me back then because it would have saved so much time.

Brendan Wood
But we’re here now! You just have to move everything to Questrade, right?

Money Mechanic
Well, I think one of the nicest features is so many people, like he said, are the the buy process, we’re all in the accumulation stage, and you’re funneling money in there every month, and you get the money shows up there. You’re like, Huh, where do I put this? Yeah, and being able to have that reference or going or using going through Passiv, it’ll tell you exactly what to buy, like down to the share. I think that it helps a lot of DIY people that are that want to be DIY, but are still a little intimidated by the whole process.

Brendan Wood
We actually found so we’re talking about like, what features people tend to like the most and like the one-click trade thing is by far the number one feature where people do and they’re like, Holy moly, you just placed like 10 trades in four seconds. That’s, that’s incredible, you know. And it’s, it’s like a really feel good feeling for people. Another one that gets this sort of like, wow, moment out of people is the cash notification. So one of the first things that we built into the app after launching it was the ability to detect when new cash or dividends hits your account, and we fire off an email to you as soon as we see it. And it seems like a really simple thing you know, like, is that really such a valuable feature, but I’m not aware of any brokerages that tell you when you receive dividends or when your cash is actually available to trade in your account. And that for me personally was a big deal because with six accounts and holding multiple assets in each I’d probably be receiving dividends four or five times a month, and new cash coming in. Like you know, it would be sent from my account on a certain day but who knows it takes one day maybe three days to actually appear in the account. And this thing would just say it’s time to come in and allocate your money. Wow, that’s that’s kind of like a game changer rather than having to like log in every day and just see do I have my cash yet? Is it there yet? You know?

Money Mechanic
Yeah, definitely. That’s all your notifications there along with the drift there. I think that is a big help.

Chrissy
Well, I was gonna say another benefit of Passiv, then, clearly is it helps to take away the emotional side of things because it automates so much of it and it makes it very much a numbers game where it’s very black and white. Is it time to trade time to sell like you can see it right off the bat. So I think that is a huge benefit to DIY investors, especially those who are more prone to emotional decisions.

Money Mechanic
Aren’t we all? I will say that I did go down a bit of a rabbit hole on when I’m looking at my portfolio page here. Down on the bottom, you’ve got a link to Portfolio Visualizer, which I hadn’t used before, but I got lost in there, like an hour, because it’s a separate tool, but you’ve linked to it. And it’s pretty cool. You can run back testing on existing portfolio Chrissy, you’re looking at me like you’ve never heard of this?

Chrissy
No!

Money Mechanic
I’ll link it to it. So you can just go play with it. This is like a money nerd’s dream come true.

Chrissy
Tell me more. Explain what…

Money Mechanic
Yeah, why did you guys link to it, why you put it in there? What’s going on?

Brendan Wood
So we like from a product development standpoint, we don’t really like to link in third-party applications very much, because it just turns into like, kind of a hodgepodge and disorganization, but Portfolio Visualizer, like blew my mind the first time I used it. Yeah, this is an amazing tool. I wish we could have this baked into the product. But like, can you imagine the amount of effort that went into building this?

Money Mechanic
Yeah, it’s ridiculous. The number of metrics that it goes through for everything is crazy.

Brendan Wood
Yeah, it’s a very impressive piece of software. And after using it for a little while, I realized that like when you enter a portfolio there, it modifies the URL. And so you can actually generate these URLs and input portfolios, sort of automatically. So that’s when we said, okay, we have to link this in Passiv and we’re going to, you know, basically use the individual’s target portfolio to generate a link so that you can back test it with just a click of a button on Portfolio Visualizer. And it works really well. And then once you’re in there now where you can add other things you want to benchmark it against, and so on.

Chrissy
Oh, cool. So I have a question, out of curiosity, have you built in any features that you’ve gotten rid of, because you realize it didn’t work or people weren’t using it?

Brendan Wood
There’s, there’s one feature that we’ve we were we almost deleted a few months ago, and I just don’t think we ever actually got around to it. And, like, people ask for it occasionally. But I’m not sure many people are actually using it is the thing. So uh, like our target audience, like people who use Passiv it has a really high proportion of software engineers. Not intentionally, I think it just might be some like nerd factor involved in, you know, managing your own money. So there are a lot of software engineers who use Passiv, some of them have their like, they might want to do like a balanced fund investing style, like we do with Passiv but they also might want to adjust their targets more often. Or they want to like pull the data into like a separate reporting tool or something, right. And so we had some people basically tried to like reverse-engineer our API and like, try to use it for their own purposes. And after the first three or four times that happened, we’re like, we have this API, why don’t we just like let them generate their own tokens for it and go with it, right. So we enabled an API and like made certain endpoints public so that people could just write their own tools for it. And we had that live for about a year. And after like, talking to users about it, we found that it was actually creating more confusion than anything else, because it’s right there on your settings page. And it’s like, do you want to enable the API and people are like, well, aren’t you using the API to talk to my Questrade account? I was like, well, it’s a different API. It’s not the same API, right? Yeah. And then we looked at the actual usage. And like, basically, nobody was using it. So it was like a month or two ago that we were like, yeah, we should probably turn that off. But just yesterday, a guy emailed out of the blue, and was like, Can I use your API? And like, Well, you know, we shouldn’t turn it off, just hide it a little better or something?

Chrissy
Yeah, have a tutorial for it.

Money Mechanic
I’m just seeing that here. And in the settings right now I’m having a look at it, I would have not even known what that is. So that’s basically but I also just noticed above that we didn’t mention at all that you do have second factor authentication ability as well. So that may be important for people from a security standpoint.

Brendan Wood
Yes, we do. So it’s a SMS SMS based two-factor authentication, which is a good first step that was like our first attempt to two-factor authentication. And we intend on improving it with more secure forms in the future. So like, SMS is good, it’s convenient, it’s definitely more secure than not having it. But it’s not the same as having like a cryptographic token on your phone, which is like the next iteration.

Chrissy
I was going to ask about that. Because the issue I find with SMS notifications is if I’m traveling, and my cell phone isn’t with me, because it doesn’t work in the country I’m in I can’t access my account, it’s requiring that so I’ll be locked out. So it would be great if you can integrate different form of two-factor authentication.

Brendan Wood
Absolutely. That’s that’s the goal. And we have people occasionally that email us like, Hey, I’m not getting my, my code. Why is that right? And then we, you know, open up a support ticket, and we look into it and like, after going back and forth with them with an hour, they’re like, Oh, actually, I’m on a boat in the middle of Pacific and it’s like, well, I don’t know.

Chrissy
So I do have one question to dive into more detail about the buy function because Canadian Couch Potato really teaches you to purchase at the was it the ask price so that your order goes through right away. So how does that work? If you automate that does it does your does Passiv look at what the ask price is and then it sets it at that? But how exactly does it work? Because you said it’s just one click right?

Brendan Wood
Yeah. So there’s the default way that it works is we do use market orders. So whatever the ask price is, that’s what you’re going to get filled at, unless you buy so much that you’re like bumping the price up or something like that, right? So market orders they’re, they fill instantaneously. And that works really well for the most people. We have had people asking us for limit orders for a long time. And personally, I don’t really, I don’t really get limit orders, I get why they’re important. And they exist and people use them. But for me personally, like I, I’m not particularly interested in using them, I’m generally buy ETFs that are like really liquid. So it’s not like there’s too much risk of a flash crash or something like that happening. And it’s super easy, and it works well. So we did actually listen to the feedback on limit orders, though we had enough people asking for it that eventually we’re like, you know what, let’s just enable this way of doing it. But the problem with it is that the user experience would end up being that much worse if you had people manually typing in every price that they want to execute at. And then if they accidentally entered a price that was a non marketable limit order, meaning something that’s below the ask price. So you know, someone’s offering a stock at $100. And you say, I’m going to buy it for 99? Well, your orders not going to get filled. And our one-click trade interface is sort of based around the expectation that the orders execute quickly. And in fact, as a safety feature, if we go more than I think it’s 20 seconds without being able to fill your order, we bail out on the whole thing, we just cancel all the orders we had queued up and we’re like, no, we’re just not going to do it. Because it might not get like something’s off clearly, like the price is wrong or whatever, right? So when we were buying this limit orders feature, we’re like, Well, you know, we can’t let people place non-marketable orders, because that would kind of throw off the entire flow of the system, and it defeats the whole purpose, you know, like, who wants to place an order and then come back two hours later and realize didn’t get filled? That’s not really the point, right? So the way we do it instead is we allow you to set like one global setting that says Like, I’m willing to pay a premium of this many percent on any stock or ETF that I want to buy or you know, like a premium when you buy or over premium when you sell whatever works kind of both ways. And that works really well. So if you put in a premium of like a 10th of a percent, I mean, you’re it’s basically the same thing as as a market order, except that you have a hard cap on how much you’re willing to pay in case there is a, you know, Spike or crash or something like that.

Chrissy
Okay, so that is a setting that you can select in Passiv?

Brendan Wood
Yes.

Chrissy
Okay, that makes a lot of sense to me, I now I’m confused because I was trained by Canadian Couch Potato to always use limit orders. Always, always, always. And so I, I’ve never really use market orders. But it makes sense why you would do it that way. That that ensures the order just goes through at the current price. And that’s what you want. You just want it done and you want it to be over so that you’re not thinking about it and agonizing over the price.

Brendan Wood
That’s right, yeah.

Money Mechanic
Wrap Up Chrissy?

Chrissy
Yeah, I was gonna ask you. Now, would either of you like to discuss anything that we haven’t brought up yet?

Money Mechanic
Perfect, we hit every point.

Brendan Wood
I know, you went through every important bit there.

Chrissy
Well, before we wrap up, I would like to point out something that this is a completely Canadian company, and we love supporting Canada. So can you tell us a little bit more about where you’re based? Because I think that’s pretty cool that you’re not in one of the major cities in Canada.

Brendan Wood
Absolutely. We’re based in Fredericton, New Brunswick, and it is a gorgeous city. I’m personally from Newfoundland, I grew up in Newfoundland, maybe you can hear a little bit of the accent and my voice.

Chrissy
No, I love the accent, but I can’t hear it.

Brendan Wood
I’m hiding it very well then. Yeah, so I moved here for university when I was 18. And I liked the city so much that I decided to stick around. So now I have a family here and an extended family in the province, which is wonderful. And it’s really a wonderful place to live. So we I personally kind of had like, no interest of doing this elsewhere. But we often get people saying like, Well, why aren’t you in Toronto? Isn’t that where you want to be? Why don’t you move to San Francisco and raise some money, right. You know, I did the San Francisco thing years ago, like I was down there for half a year with the company I was working for. And it’s a really nice place, but it’s a very different place. And I kind of prefer my little side of the world here.

Chrissy
Yeah, I’ve heard Fredericton is a bit of a tech hub. Is that true? Is it growing?

Brendan Wood
Yeah, it actually is and you might not know it without having like kind of heard this. The success stories from the area but it very much is it’s we have like a very strong Computer Science Program at the University here. And a lot of the people who study here end up staying here. So there’s like a really strong software community in the area. And you know, entrepreneurship in general is a very popular activity.

Money Mechanic
There you go, coast to coast, on Explore FI Canada.

Chrissy
We are. That’s why we’re recording in the morning so that, it’s not like midnight where you guys are.

Brendan Wood
We really appreciate that.

Chrissy
Yeah, we’re happy to.

Money Mechanic
Yeah, it was an absolute pleasure having you both on the show. Thanks so much for telling us more about Passiv and why it’s valuable for all the Questrade users out there in our community. Hopefully, we’ll, we’ll keep on top of that I’m a user now. So I’ll be following along and keeping my portfolio more balanced than I used to. I’m way out of balance, which is quite funny. After I did it, I’m like, I’m gonna have to be throwing some a little extra coins in there to rebalance. Because I don’t want to do any selling. But right on. Wood, any parting comments?

Brendan Wood
I just wanted to thank you both for having us. We really appreciate it. It’s always great to have a conversation about like, you know, the origin of the product and like the things we had to think about when building it to try to like make it a unique tool that fits the vision and the thing we’re trying to do. Really appreciate it. Thank you.

Chrissy
Thank you. Yeah, your your product aligns very well with the FIRE community. So I even though I’m not a user, I’m happy to promote it because I think it works great. I know I’m sorry, I’m not. I’m invested with my financial planner so… But if I if I went back to DIY investing, I’d be 100% on board with Passiv. It’s great.

Money Mechanic
Come on, Chrissy. We’ll make you open up a Questrade account with one fund in there just so we can get your feedback.

Chrissy
I should. Yeah, just to tinker around with it.

Money Mechanic
Okay, thanks again. We will catch all your listeners on the next episode of Explore FI Canada.

Chrissy
Hey listeners, we hope you enjoyed this interview with Brendan and Bly from Passiv. If you’d like to support us in creating more great content like this. Here’s a free way to do that. Sign up for Passiv by visiting exploreficanada.ca/passiv. It won’t cost you a thing, and in return, you’ll get access to Passiv Elite, totally free. Happy investing!

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